Diabetes results from pancreatic beta-cells' inability to maintain euglycemia through adequate insulin secretion. In type 2 diabetes, beta-cell failure occurs as a consequence of insulin resistance, the main predisposing metabolic abnormality. The mechanism by which insulin resistance promotes beta-cell failure is unknown. We seek to test the hypothesis that insulin/IGF signaling regulates beta-cell compensation in response to peripheral insulin resistance by a paracrine mechanism promoting terminal differentiation of a subset of pancreatic duct-associated cells. We further propose that beta-cell failure occurs when this sub-population of pancreatic duct-associated cells becomes depleted as a result of accelerated differentiation in response to insulin signaling. We present data suggesting that insulin/IGF-sensitive duct-associated cells represent a population of endocrine progenitor cells, characterized by the expression of the forkhead transcription factor Foxo1. The investigator's laboratory has identified Foxo1 as a key effector of tyrosine kinase signaling in a-cells and duct-associated cells. Using mice with targeted Foxo1 ablations, this laboratory has shown that loss-of-function Foxo1 mutations increase beta-cell growth and prevent diabetes in mice genetically predisposed to beta-cell failure, while Foxo1 gain-of-function is associated with impaired beta-cell proliferation. The studies proposed in this application investigate mechanisms that regulate beta-cell terminal differentiation and proliferation and try to identify the Foxo1-positive pancreatic duct cell sub-population, as well as molecular targets of Foxo1. In the first aim, we will test the hypothesis that Insulin/IGF acts in a signaling in a paracrine fashion to stimulate terminal differentiation of a subset of duct-associated cells that express the transcription factor Foxo1. In the second aim, we will generate and characterize mice with loss-of-function Foxo1 mutations in pancreas, and identify molecular targets of this transcription factor using RNA profiling studies. In the third aim, we will use a genetic selection approach to isolate Foxo1-positive pancreatic duct-associated cells and examine their lineage as well as their differentiation potential. The upshot of these investigations is that manipulation of Foxo1 function in endocrine precursor cells may become an adjuvant therapy in the treatment of diabetes.